EMEA suppliers fail to take advantage the – no longer global – network market.

Physical networking is an essential element of both the Communications and IT markets infrastructure, as well as a key part of the long-term and continuing convergence between the two. Born with the invention of telephony, Service Provider networks connect billions of customers and enterprises providing fixed line, wireless and broadband services and whose technology is generally described in generations – viz ‘2G’, ‘3G’, ‘4G’, ‘5G’ for mobile phones. Due to the stark differences between the two markets spending (measured in current $US) growth vary significantly each year. I show the annual spending growth for each by year from 2013 to 2023 in the solid lines my Figure above. For comparison I also show the growth in all hardware markets (the blue dotted line) and in Communications services (the dotted pink line). For 2024 I expect the enterprise network market to slow significantly due to its big positive difference to the growth in overall hardware spending last year. Service provider network sales will probably remain at around the same level as in 2023.

Enterprise networking grew by 13.1% to $73.5b in 2023 – its strongest annual growth since 2004. The market was split 47:27:25 between the Americas, EMEA and Asia Pacific (see my Figure above where I also show dotted lines for the size of the market in EMEA and Asia Pacific to represent values based on constant 2005 exchange rates af the $US; on these measures the value of the EMEA market is worth less (due to the falling value of the Euro and other currencies against the dollar) and more in Asia Pacific, where the Yuan Renminbi has gained value over the period.

There are a number of product types in the enterprise network market, which I show in my Figure above. The largest of these are LAN switches, followed by enterprise networking (such as IP telephony) and routers. Wireless LAN is also a strong sub-market. The value of the firewall market, used for cyber security has remained relatively level throughout the period from 2005 to 2023. Strong growth in the Storage Area Network (SAN) market is due largely to the uptake of Infiniband products for generative AI markets, supplied by Nvidia which acquired Mellanox in April 2020.

Asia Pacific is the largest market for service provider networks. In 2023 the $141.1 billion spending in current $US was spread 56:25:18 between Asia Pacific, EMEA and the Americas respectively. Huawei has gained massively from this deep investment by the Chinese government and is by far the leader in 5G mobile networking. That this growth has failed to materialise in either the Americas or EMEA is due in part to the suspicion of the US and other western governments that 5G and other service provider networks could/are being used to gather data on their citizens for the Chinese government. The imposition of sanctions has severely restricted the roll out of the latest mobile networking technology and the two largest European suppliers – Nokia and Ericssen – have failed to take up the slack.

I show market shares for the overall, service provider and enterprise network markets above. It shows that the total market is dominated by Huawei and Cisco who, between them, held slightly over a 50% share in the year to the end of March 2024.

Looking at the top seven suppliers in the network market (my Figure above) we see some major differences. The market leader Huawei generated 90% of its revenues from service provider networks, while Cisco – in second place – made 95% of its revenues from enterprise networking. Other US leaders HPE (including its recently acquired Juniper) and new-comer Nvidia make almost all of their revenue from the enterprise, rather than service provider market.

I show the annual revenues from the network market for the period between 2003 aand 2023 in my Figure above. It demonstrates the massive rise and continued dominance of Huawei. Surprising perhaps is the flat-lining of Nokia and Ericsson; mainly service provider network players, they have signally failed to take advantage of the anti-China restrictions introduced by the US and the EU in the developing 5G market. In the process they have devalued the regional importance of EMEA in the overall ITC market, which has been corralled by the US in terms of patents and China in terms of manufacturing. 20 years ago it looked as if telecommunications was a key area in which EMEA could lead the world – not now.